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PMI Study: Denver’s Housing Market Strong

This is from John Rebchook’s blog at the Rocky Mountain News…

"There is only a 1 percent chance that homes in the Denver- Denver-Aurora metropolitan area will lose value two years from now, according to a widely watched national report. The Spring 2008 U.S. Market Risk Index released by the PMI Mortgage Insurance Co., tracked the 50 largest metropolitan statistical areas in the country. It found that only 13 metro areas are poised to perform better than the Denver area. By contrast, Riverside-San Bernardino-Ontario Calif., had the highest risk, with a 93.2 percent chance of falling prices in two years. Denver scored better than any city in California, Florida or the East Coast. Metro areas that did better than Denver included Cleveland, Austin, Kansas City, Mo., San Antonio, Houston, Dallas and Fort Worth. "Denver is still in a pretty good position," said David W. Berson, chief economist and strategist for The PMI Group. The report shows that home prices in the Denver-area were down 0.49 percent in the fourth quarter from a year earlier.

A local report based on Metrolist data released this week showed that in the first quarter, the average price of all single-family homes and condos sold by Realtors was $255,217, compared with$269,525 in the first quarter of 2007, a 5.3 percent drop. "Even in Denver, prices are going down," Berson said. "But overall, we think the entire nation is going to pick up a bit in the second half of the year, and Denver will pick up more than the national average." Still, he said it is hard to say that the Denver housing market is at the bottom. "It’s hard to predict the exact bottom," Berson said. "On a national basis, home prices are still falling in many metropolitan areas, and they will probably stop falling and start to stabilize in the second half of the year. The Denver-Aurora MSA (Metropolitan Statistical Area) is one of the better markets." Berson said there may be a "bit of a disconnect" between with buyers and sellers. Many buyers don’t want to buy now, because they think prices might come down more. Prospective sellers, meanwhile, want to hold off on putting their homes on the market until prices start to go up. "What will happen is that prices will start to go up slightly, and more buyers will enter the market," Berson said. "What you want to see is an orderly, gradual increase in prices, rather than a big spike." Kristal Kraft, a broker with the Berkshire Group, said that the PMI analysis is right on target. "We keep hearing only the bad news," Kraft said. "The only thing wrong with our market now is the lack of consumer confidence. People keep hearing all of this bad stuff and they are afraid to buy." Still, she advises homeowners not to sell right now, unless they absolutely have to. But what that has means in some neighborhoods there are not enough homes for sale, which has led to people being out-bid for homes, even in this market. Recently, she was representing a young couple wanting to buy a home in the $400,000 range. They were out-bid twice on the same home.
Then, they bid full-price on a foreclosure in Park Hill. After the inspection, they found that it had a "ton" of things wrong, including a bad furnace and radon, but Countrywide, the lender agreed to fix everything. "They got it for about $385,000," Kraft said. "It’s on an awesome street. And last year, it was on the market for just under $500,000, so they think it is a really good deal."

Gary Bauer, an independent broker who releases a monthly report based on Metrolist data, said nothing in the PMI report surprises him. "We have been able to consistently do better than the national average, " Bauer said. "Our national ranking sounds really good. I do not believe we are at the bottom yet, but we are not far from it. It’s like the recession word. You don’t really know until a month or two after." Bauer said that some reports have suggested that most people in the Denver area have lived in their homes more than the national average of seven years. "Over the past seven years, homes have appreciated 55 or 56 percent," Bauer said "If they’re now down 10 percent, a lot of people are still up 45 percent." That means that while they won’t get to sell their home at their all-time high, they also will be buying homes at a discount. In other words, what you lose on the selling end, you gain on the buying side, which amount to a wash."